When you’re a small business, you’ll be thinking about what you can do to drive revenue and maximise profit. There are many strategies SMEs might implement to do this, from running sales campaigns, adding new products and scaling up production.
Market share is a significant factor in how successful your business is in securing sales. If you have a low market share, it could signal that you are being overshadowed by competitors or that just not enough people know about your offering. Without improving your market share, you’re unlikely to dramatically grow your sales and unleash the profit you want to see.
Below, we explore the concept of ‘market share’ in more detail and put together some of our top tips on how to increase your business’s.
What does market share mean?
Market share is the percentage a company controls of the total market for its products and services. Market share is calculated by measuring the percentage of sales or percentage of units a company has in the overall market.
For example, if a company has £1 million in annual sales and the total sales for the year in its industry is £100 million, the company’s market share is 1%.
Under the percentage of units method, a company that sells 50,000 units annually in an industry where 5 million units are sold per year also has a market share of 1%.
Why it’s a good thing to increase your market share
If you’re looking into how to increase market share for a small business, a good place to start is completely understanding why this is something that should be on your radar.
In short, a high market share puts companies at a competitive advantage. Companies with high market share often receive better prices from suppliers, as their larger order volumes increase their buying power. Increased market share and greater productivity go hand-in-hand.
It also puts you in a better position against your competitors – the higher percentage market share you have, the more sales you will detract from other companies in that industry.
Simply put, increasing market share means increasing the effort you put into sales as a business. Essentially, you want to be making as many sales as possible, so that you become the biggest fish in your sector.
Ensure consistent quality
We are all consumers, which means we’ve all experienced sales – from buying groceries at the supermarket to a car from a garage. One of the things that influences the sale early on is the experience. Have you found it easy? Have you received the high-quality product you were expecting?
This is the same in all industries. You have to keep your quality high whether it is for products or services and always provide an outstanding customer service. This will ensure that you have returning customers, and by good old-fashioned word of mouth and customer reveiws, it will encourage new customers to reach out to you.
Get to grips with marketing
Do you know your customer? It’s one of the most important things when it comes to marketing, to understand your customer. This means you can talk directly to them, comprehend what they need, and provide a more tailored product or service. You can do this by engaging on social media, sending out emails with high quality and useful content and also engage face to face if that works for your company. All of this will grow the awareness of your business, helping you to target more potential customers and generate sales.
You should invest in your marketing and outreach by either using an agency or hiring a specialist. Coming up with thorough market research takes time, especially if you want to do a deep dive into your business’s buyer personas, target audience and customers. This knowledge will determine how you tailor your messaging for your product/service to these different types of customers.
By investing in these activities, you can continue to focus on the big market share driver, sales, while having the right activity working alongside you to bring customers to your door.
Be the best
You may be offering something unique, or perhaps you’ve come up with a better version of something that is already on the market. Either way, it is important to think big and be the best. Consider Apple and the mobile phone. They came to the market in 2007 with the full touch screen, innovative features such as access to the internet and options for personalisation. Apple believed in what they were doing, and due to the innovation, they earned a 3% market share in their first year.
In 2021, Apple has a 50% market share in the mobile phone industry alone. This means that across the entire globe, half of phone owners have an iPhone. While you have no doubt already done quite a bit of research, delve deeper into your competitor analysis to determine what they are offering and seek to better it. It’s really important that you are always ahead of the game when it comes to following industry trends and constantly addressing consumer needs.
Don’t be afraid of growth
Scaling as a business will enable you to generate and meet more demand and in turn, expand on what you’re offering. You may need growth finance to enable you to do this but it’s very much a case of ‘you can’t make money unless you spend money’, and it will boost your profitability in the long term. While looking to grow your own company, you may come across opportunities to increase your market share through the acquisition of a company that aligns well with your own products or services. Keep a look out on these opportunities in competitors that would be a positive addition to your company.
There are many different types of finance to look into when you’re considering looking for funding in order to grow. Before going to lenders, you need to have a good understanding of the figure you need and where this spending is going. Some lenders will throw up a huge range of problems you hadn’t even considered, so it’s important that you know exactly how much money you need and why. You can borrow any amount from the low thousands to hundreds of thousands, depending on many factors (some of which are out of your control) and your requirements to achieve the growth you want.
Diversify your audience
Growth requires stepping outside of your comfort zone. Find new markets and audiences where you only need to adapt your offering slightly to fill a market gap. It is important that in doing this, you don’t alienate your loyal customer base.
You can reach different audiences by doing plenty of research and then tailoring your outreach to them. In some cases, diversifying might mean adding new products or services to your roster, or simply finding ways that your existing offering could help other people.
Focus on customer retention
While it is a great way to grow your market share by diversifying your audience, it is almost always more important to focus on customer retention. This means you provide such a high-quality product or service that they keep coming back for more.
Retaining customers is cheaper than getting new ones and in turn, increases their lifetime value. How many services do you pay for that you wouldn’t even consider cancelling? Take Netflix for example, a service that is constantly upgrading, creating new content and tailoring their offering to their users.
By focusing on satisfying your current customers while still attracting new ones, you can continue to grow your market share.
Conclusion
Increasing market share is essential for any SME who wants to reach the next level of growth and give their sales a boost. By identifying the right tactics, you can successfully attract more customers to your brand while retaining your existing customer base, with the effect of generating more demand and keeping a competitive edge.
If you are seeking finance to help you improve your market share, such as growth funding, but are unsure what options are available for you, we can help. Our advisors can discuss your unique situation and come up with appropriate solutions, aligned with the next steps your business needs to take in order to achieve its goals.